Bellway sales lift sign of a revival in market

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HOUSEBUILDER Bellway has seen a pick-up in sales over the past two months, raising hopes that the property market could be emerging from the economic downturn.

Talking about the first 18 weeks of the new financial year, finance director Alistair Leitch said: “The second nine weeks have been stronger than the first nine weeks, which is unusual. It’s remarkably resilient.

“I can only think people are thinking they’re not going to take a blind bit of notice of the eurozone debt crisis,” he added.

Mr Leitch said sales in the last nine weeks rose to 104 per week, from 85 in the nine weeks prior to that, lifting the 18-week average to 95 sales per week.

Britain’s fourth-largest housebuilder by market value said it expects first-half completions to be five per cent higher than last year due to an increase in the number of trading outlets.

The group said reservation rates rose 14 per cent in the four months to the end of November, while the average selling price increased seven per cent due to a shift towards more traditional family homes.

Visitor levels have held up well despite the ongoing crisis in financial markets.

Bellway said it welcomes recent moves by the Government to kickstart the housing market through a raft of measures such as the mortgage guarantee scheme, but added that consumer confidence would be the biggest factor to watch next year.

“Whilst the group welcomes such initiatives, the outcome for the full year will be dependent primarily upon consumer confidence, especially during the spring selling season,” it said.

Chancellor George Osborne announced plans last week to help 100,000 struggling young families to buy newly built homes and provide a £400m fund to help construction firms kick-start projects.

“We don’t know what the details are, we don’t know what rates are going to be used by lenders and we don’t know costs yet,” said Mr Leitch.

But he said Government measures to stimulate the housing market in general have given “a degree of comfort”.

Bellway said it has secured 73 per cent of sales for this financial year while its order book stands at £458m, compared with £440m at the same time last year.

Analysts at Evolution Securities said in a note: “An interim management statement on a Friday morning in mid-December could cynically be seen as trying to sneak some bad news past a hungover market.

“However, Bellway has put out a very solid trading update, most importantly highlighting that visitor levels, reservations and prices have remained resilient, despite the ongoing eurozone crisis.”

The broker said the lack of impact on housing activity underlines its view that the housing market has reached its lowest point in the cycle.

Evolution said the statement “provides confidence that the story continues to roll-out as expected, and we are very happy to remain a buyer”.

Bellway is currently targeting resilient pockets of demand in the north.

Mr Leitch said the group has seen encouraging performances at sites in Leeds and Doncaster.

“I know it’s a cliché but it comes down to location, location, location, ” he said. “We are still buying land in the north and still buying land in Yorkshire.”

Bellway also announced a new £150m lending facility with Lloyds Banking Group.

Numis Securities currently expects pre-tax profits of £89.5m, compared with £67.2m a year earlier.

Analyst Chris Millington said: “Whilst we have left estimates unchanged at this early stage in the year – wanting to wait and see evidence of the spring selling season – the risk to estimates remains firmly on the upside.”

Richard Curr, head of dealing at Prime Markets, said: “One could be forgiven for thinking that the recession has passed by the housebuilding industry altogether this year, such is the pace of growth as illustrated by current and future reservations, and the level of investment going into land purchases for new developments.

“With a forward order book well ahead of last year and a new overdraft facility for land purchases the future is clearly very bright.

“The Bellway share price recovery has comfortably outperformed its rivals.”

The company raised its dividend by nearly a third in October to 8.8p after it posted a 51 per cent rise in annual profits to £67.2m.

Turnover was up 15 per cent at £886.1m.

ros.snowdon@ypn.co.uk